Heres a plan for you,
1. open a brokerage account with your bank, 2. buy vanguard index funds for the next 20 years, 3. retire.
1. open a brokerage account with your bank, 2. buy vanguard index funds for the next 20 years, 3. retire.
The details are what get me. I need to buy index funds and usually you are advised to save as much as you can. I want the advice that shows me how little I can save. My kids are only going to be kids once and I'm not going to forgo taking them to Disney or work stupid hours so that I can live like a king when I'm old. My goal is to live as well as I can today while still being certain that I'm not going to be a burden on anybody when I'm 80.
Paying an expert for advice appeals to me just because I have no confidence that I'm not taking something important into account.
All you have to do is set up a bank account to automatically put money into your account every so often. That's easy to do on their platforms. They'll keep it balanced among several ETFs based on how risky you're feeling. You won't have to pay any fees to purchase or sell the ETFs like some places charge. They do a great job of making sure you understand where you're at & what you're likely to retire with. They also post plenty of information to help you understand your investment.
25 times your annual expenses.
At your age, with a US assumption, you have the benefit of Social Security almost certainly providing you a good portion of income at Age 67 (any time between 62 and 70 is reasonable, and taking SS at age 62 is best unless you are very likely to live past 84.)
Ignoring SS, if you invest 25 times your annual expenses into a 60%/40% stocks/bonds split, your expenses will be roughly 4% of your investments, so you withdraw 4% each year. Your investment growth (including dividends) may or may not exceed your expenses, but, overall, you should make it 30 years without running out of money. [0]
What you need to do is determine your expenses (including Disney trips), and make sure you don't exceed that budget once you stop having income. (Of course, you can and should adjust if things go better or worse than expected when you're retired.)
I've got good news and bad news for you.
The good news is that you're not as clueless as you think.
The bad news is that person you're paying to give you advice? They also don't have a clue, but it's their job to make you feel like they do.
Anecdotal evidence: 12 years of investing with Edward Jones in various mutual funds (2005-2017), and I would have made waaaay more money if I'd just bought ETFs to begin with.
Sure, a financial advisor is comforting to talk to, but the fees they charge are murder on your long-term return, and in the end they're just paid to spend all day reading strategy papers which at best will give them the same return as a cat picking stocks. [0]
[0] http://www.businessinsider.com/cat-beats-professional-stock-...
So either your advisor is good, and you pay them more than they are worth, or your advisor is bad, and you still pay them more than they are worth. You cannot create more (dollar-denominated) value for yourself by engaging a financial advisor.
You aren't missing anything. You need extraordinary skills, contacts, or crimes to beat the market, and if you had what it took, you'd already be in the financial industry. So just buy the index funds and hold them in a non-margin account, year after year, until you can live for a year on 3% of your accumulated principal. That's all the investments advising you and everyone else in the 99% will ever need.
Seems like I will want about twice that. Maybe $2 million saved so I can have $60k / year and I don't think that's going to happen. Shit.
If you're retiring at 67, 4% is probably safe. $1.5M would be an acceptable target for you at that age.
I'm going to dig into this some more (I really dread it) but I'm guessing I need to save another $500k or so over the next twenty years. Not impossible but not painless either.
I'm glad I started college savings accounts for my kids when they were born. They should each have $75-100k in them by the time they need it. Not enough, but it's a start.